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What explains the initial return of initial public offerings after the 1997 Asian financial crisis? Evidence from Thailand

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  • Vithessonthi, Chaiporn

Abstract

Do financial development, domestic interest rates, and interest-rate differentials simultaneously affect the underpricing of initial public offerings (IPOs) in emerging market countries? Using a sample of 187 IPOs in Thailand between 2000 and 2012, I show that financial development, stock market conditions, bond market development, and interest-rate differentials affect the initial return, and that several of these effects appear to be contingent on (1) whether the IPOs are hot or cold and (2) whether the interest-rate differential is positive or not. During periods of positive interest-rate differentials, the effect of the interest-rate differential on the initial return is positive and economically significant. Overall, my findings suggest that investors might undertake carry-trade strategies in the IPO market. In addition, the initial return of the IPOs in my sample appears to be lower than the initial returns reported by previous studies using the pre-1997 financial crisis period sample.

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  • Vithessonthi, Chaiporn, 2014. "What explains the initial return of initial public offerings after the 1997 Asian financial crisis? Evidence from Thailand," Journal of Multinational Financial Management, Elsevier, vol. 27(C), pages 89-113.
  • Handle: RePEc:eee:mulfin:v:27:y:2014:i:c:p:89-113
    DOI: 10.1016/j.mulfin.2014.05.002
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    More about this item

    Keywords

    Financial development; Initial public offerings; Interest-rate differentials; Stock market conditions; Thailand;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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